Czarnomorski Pañstwowy Uniwersytet im. Petra Mohy³y, Ukraina
Creation of a Free Trade Area between
the EU and Ukraine: Challenges and Perspectives
T
he basic document, which defined the legal mechanism of bilateral co-operation between Ukraine and the EU, was the Agreement on Part-nership and Cooperation between Ukraine and the EU (the APC). It was signed in June 1994 and came into force on the 1st of March, 1998 for 10 years. And it is the gradual realization of the Agreement that has al-lowed a visible progress in relations between Ukraine and the EU in terms of economic integration of Ukraine into the EU. Despite several short-comings, the process of implementing the APC was generally positive and led to further expansion of economic relations between Ukraine and the EU. Obviously, the speed and extent of economic integration depends on many factors and consistency of measures taken by Ukraine, its ability to ensure the practical implementation of the declared priorities.Term of the Agreement on Partnership and Cooperation between Ukraine and the EU expired in February 2008. The year of 2011 marked three years since the European Union and Ukraine have started negotia-tions on a deep and comprehensive Free Trade Area. Creating a Free Trade Area between Ukraine and the EU meets the public policy of Ukraine to-wards European integration, because the course to join the European Union is the main and unchangeable foreign political priority of Ukraine, which is enshrined in the Law of Ukraine “On Principles of National Secu-rity of Ukraine”1(2003), the Law of Ukraine “On the foundations of Do-mestic and Foreign Policy”2(2010).
Due to the innovative capacity, developed effective mechanisms for its functioning, well-established institutional structure, the EU is one of the
1 Ïðî îñíîâè íàö³îíàëüíî¿ áåçïåêè Óêðà¿íè, Çàêîí Óêðà¿íè â³ä 19.06.2003, ¹ 964-IV [Åëåêòðîííèé ðåñóðñ], Îô³ö³éíèé ñàéò Âåðõîâíî¿ Ðàäè Óêðà¿íè, ðåæèì äîñòóïó: http://zakon.rada.gov.ua/cgi-bin/laws/main.cgi?nreg=964-15 (íàçâà ç åêðàíó). 2 Ïðî çàñàäè âíóòð³øíüî¿ ³ çîâí³øíüî¿ ïîë³òèêè, Çàêîí Óêðà¿íè â³ä 01.07.2010, ¹ 2411-VI [Åëåêòðîííèé ðåñóðñ], Îô³ö³éíèé ñàéò Âåðõîâíî¿ Ðàäè Óêðà¿íè, ðåæèì äîñòóïó: http://zakon.rada.gov.ua/cgi-bin/laws/main.cgi?nreg=2411-17 (íàçâà ç åêðàíó).
leaders in the global economic market. After recognition of the Ukrainian economy as a market economy and Ukraine’s accession to the World Trade Organization negotiations on a Free Trade Area between Ukraine and the EU have become especially important.
Ukrainian scholars in Public Administration researched the eco-nomic aspects of integration of Ukraine into the European Union. For instance, V. Popova investigated ways to improve tax policy in light of European integration of Ukraine3. L. Ilchenko-Syuyva explored state mechanism of monetary policy of Ukraine in the context of European integration4whereas G. Dmitrenko – governance processes of adapta-tion of the tax system of Ukraine to the European Union5. Y. Bon-darenko6, A. Grigor7, Y. Zhuravlyova8, Y. Lahutov9, O. Malynovska10,
3 Â. Â. Ïîïîâà, Óäîñêîíàëåííÿ ïîäàòêîâî¿ ïîë³òèêè Óêðà¿íè â óìîâàõ ºâðî-³íòåãðàö³¿: àâòîðåô. äèñ... êàíä. íàóê ç äåðæ. óïð.: 25.00.02, Íàö³îíàëüíà àêà-äåì³ÿ äåðæ. óïðàâë³ííÿ ïðè Ïðåçèäåíòîâ³ Óêðà¿íè, Ê. 2009, 20 ñ. 4 Ë. Â. ²ëü÷åíêî-Ñþéâà, Äåðæàâíèé ìåõàí³çì ìîíåòàðíî¿ ïîë³òèêè Óêðà¿íè â êîíòåêñò³ ªâðîïåéñüêî¿ ³íòåãðàö³¿, Àâòîðåô. äèñ... êàíä. íàóê ç äåðæ. óïð.: 25.00.02,Íàö³îíàëüíà àêàäåì³ÿ äåðæàâíîãî óïðàâë³ííÿ ïðè Ïðåçèäåíòîâ³ Óêðà¿íè, Ê. 2005, 20 ñ. 5 Ã. Â. Äìèòðåíêî, Äåðæàâíå óïðàâë³ííÿ ïðîöåñàìè àäàïòàö³¿ ïîäàòêîâî¿ ñèñòåìè Óêðà¿íè äî âèìîã ªâðîïåéñüêîãî Ñîþçó, Àâòîðåô. äèñ... êàäí. íàóê ç äåðæ. óïð.: 25.00.02, Íàö³îíàëüíà àêàäåì³ÿ äåðæ. óïðàâë³ííÿ ïðè Ïðåçèäåíòîâ³ Óêðà¿íè, Ê. 2004, 20 ñ. 6 Þ. Ì. Áîíäàðåíêî, Äåðæàâíå óïðàâë³ííÿ ñîö³àëüíèì çàõèñòîì íàñåëåííÿ â óìîâàõ ºâðîïåéñüêî¿ ³íòåãðàö³¿ Óêðà¿íè, àâòîðåô. äèñ... êàíä. íàóê ç äåðæ. óïðàâë³ííÿ: 25.00.02, Êëàñè÷íèé ïðèâàòíèé óí-ò., Çàïîð³ææÿ 2008, 20 ñ. 7 Î. Î. Ãðèãîð, Ôîðìóâàííÿ ³íôîðìàö³éíîãî ñóñï³ëüñòâà â Óêðà¿í³ â êîíòåêñò³ ³íòåãðàö³¿ â ªâðîïåéñüêèé Ñîþç (äåðæàâíî-óïðàâë³íñüêèé àñïåêò), Àâòîðåô. äèñ... êàíä. íàóê ç äåðæ. óïðàâë³ííÿ: 25.00.01, Ëüâ³âñüêèé ðåã³îíàëüíèé ³í-ò äåðæ. óïðàâë³ííÿ Íàö³îíàëüíî¿ àêàäå쳿 äåðæ. óïðàâë³ííÿ ïðè Ïðåçèäåíòîâ³ Óêðà¿íè, Ë. 2003, 20 ñ. 8 Þ. Î. Æóðàâëüîâà, Ìåõàí³çìè äåðæàâíîãî óïðàâë³ííÿ ðåôîðìóâàííÿì âèùî¿ îñâ³òè Óêðà¿íè â óìîâàõ ºâðî³íòåãðàö³¿, Àâòîðåô. äèñ... êàíä. íàóê ç äåðæ. óïðàâë³ííÿ: 25.00.02, Îäåñüêèé ðåã³îíàëüíèé ³í-ò äåðæ. óïðàâë³ííÿ, Íàö³îíàëü-íà àêàäåì³ÿ äåðæ. óïðàâë³ííÿ ïðè Ïðåçèäåíòîâ³ Óêðà¿íè, Î. 2009, 20 ñ. 9 Þ. Å. Ëàãóòîâ, Ïîë³òèêî-óïðàâë³íñüê³ çàñàäè âçàºìî䳿 Óêðà¿íè ç óêðà¿í-ñüêîþ ä³àñïîðîþ â äåðæàâàõ ªâðîïåéñüêîãî Ñîþçó, àâòîðåô. äèñ... êàíä. íàóê ç äåðæ. óïðàâë³ííÿ: 25.00.01, Íàö³îíàëüíà àêàäåì³ÿ äåðæ. óïðàâë³ííÿ ïðè Ïðåçè-äåíòîâ³ Óêðà¿íè, Ê. 2008, 20 ñ. 10 Î. À. Ìàëèíîâñüêà, Óïðàâë³ííÿ çîâí³øí³ìè ì³ãðàö³ÿìè â êîíòåêñò³ ºâðî-ïåéñüêî¿ ³íòåãðàö³¿ Óêðà¿íè, Àâòîðåô. äèñ... ä-ðà íàóê ç äåðæ. óïð.: 25.00.02, Íàö³îíàëüíà àêàäåì³ÿ äåðæ. óïðàâë³ííÿ ïðè Ïðåçèäåíòîâ³ Óêðà¿íè, Ê. 2005, 32 ñ.
R. Storozhuk11, K. Shkumbatyuk12– all these scientists paid attention to social and humanitarian issues of Ukraine’s integration into the EU.
As a result of the analysis of recent research in public administration it can be stated that although the economic aspects of European integration processes are among the most important compared to other areas of inte-gration into the EU, they are not fully covered the field of public adminis-tration. This applies to the analysis of negotiations on a Free Trade Area between Ukraine and the European Union during the global financial crisis.
Given the above, the purpose of this paper is to highlight the general economic aspects of a Free Trade Area between Ukraine and the EU that meets the state policy of Ukraine towards European integration. The ob-jectives lie in the selection of challenges for the Ukrainian economy to create a Free Trade Area, and attempts to predict the benefits of its conse-quences for the economic development of Ukraine for EU membership in the future.
During the 1990’s a stronger orientation of Ukraine for EU foreign pol-icy was experienced. If in 1995, according to the information of the Minis-try of Economy of Ukraine, export of Ukrainian goods into 15 EU Member States amounted to 10.7% of total commodity exports of Ukra-ine, in 2000 it was already 16.2%; the corresponding figures for imports were 14.9% and 20.6%. At the beginning of the XXI century, the EU re-mained the largest trade partner of Ukraine after the CIS, the share of which accounted for 18% of the foreign trade of the country. Meanwhile, Ukraine’s share in EU’s foreign trade remained low with only 0.42%. Preservation of the negative balance in trade between Ukraine and EU can be named as another negative trend in the 1990s. Only in 1998 the nega-tive balance decreased to 727.7 million U.S. dollars (in 1997 – 1287.1 mil-lion U.S. dollars). In 2000 the negative balance in trade between Ukraine and the EU amounted to 307.1 million U.S. dollars. From 1998 a tendency of a stagnation of export of Ukrainian goods in the EU affected the
posi-11 Ð. Ï. Ñòîðîæóê, Äåðæàâíà ìîëîä³æíà ïîë³òèêà â êîíòåêñò³ ºâðîïåé-ñüêîãî âèáîðó Óêðà¿íè: ìåõàí³çìè ðåàë³çàö³¿, àâòîðåô. äèñ... êàíä. íàóê ç äåðæ. óïð.: 25.00.02, Îäåñüêèé ðåã³îíàëüíèé ³í-ò äåðæ. óïðàâë³ííÿ Íàö³îíàëüíî¿ àêà-äå쳿 äåðæ. óïðàâë³ííÿ ïðè Ïðåçèäåíòîâ³ Óêðà¿íè, Î. 2007, 20 ñ. 12 Ê. Ë. Øêóìáàòþê, Äåðæàâíà ïîë³òèêà Óêðà¿íè ó ñôåð³ ãðîìàäÿíñòâà â êîíòåêñò³ ºâðîïåéñüêî¿ ³íòåãðàö³¿, Àâòîðåô. äèñ... êàíä. íàóê ç äåðæ. óïð.: 25.00.01, Ëüâ³âñüêèé ðåã³îíàëüíèé ³í-ò äåðæ. óïðàâë³ííÿ Íàö³îíàëüíî¿ àêàäå쳿 äåðæ. óïðàâë³ííÿ ïðè Ïðåçèäåíòîâ³ Óêðà¿íè, Ë. 2004, 19 ñ.
tive trend of previous years. As for imports from the EU, it fell in the years 1997–1999 by 29% and only in 2000 showed signs of a growth13. Accord-ing to a foreign researcher W. Fritz, “in the second half of the 1990s, trade in Ukraine gradually began to increase in Central and Eastern Europe and the European Union, although Russia and CIS countries remained the big-gest trade partners of Ukraine”14. Thus, the overall dynamics of Ukraine’s foreign trade with EU countries remained unstable and insufficient to en-sure rapid entry into the EU economic space.
Germany was a leader in trade with Ukraine in the 1990s. Next came Italy, France, Spain, Austria, the Netherlands. These countries accounted for 77.8% of trade turnover of Ukraine and the EU. The smallest trade vol-umes were observed in Luxembourg, Belgium, Sweden. Almost the same countries occupied leading positions in Ukrainian imports. For instance, the main exporters of goods from EU to the Ukrainian market in the late 1990s were Germany (8.56%), Italy (2.77%), France (2.03%), the UK (1.09%), the Netherlands (1.09%) and Finland (0.78%)15.
The beginning of negotiations between Ukraine and the EU on estab-lishing a Free Trade Area coincided with the global financial and eco-nomic crisis. The financial and ecoeco-nomic crisis began in late 2008 and led to global recession in 2009, the result of which was the largest decline in world trade over the period since the recession of the world economy in 1929–1933. Observed in 2009 cost reduction in trade volumes compared with 2008 (12.2%) significantly exceeded the largest rate reduction com-pared to the previous year for the last half century (7.3% in 1975 comcom-pared with the previous year). Beginning of the year 2010 marked a revival of world economy, but of all CIS countries the biggest economic downturn recorded in Armenia and Ukraine. In addition, during the world financial crisis the worst trend of trade flows showed the European Union, as EU trade feature was that EU trade with other countries developed far more dynamic than trade between Member States. For example, in the second
13
Ã. ². Ìåðí³êîâ, ªâðîïåéñüêà ³íòåãðàö³ÿ Óêðà¿íè òà åêîíîì³÷íà áåçïåêà äåðæàâè, [Åëåêòðîííèé ðåñóðñ], Öåíòð ºâðîïåéñüêèõ ³í³ö³àòèâ, ðåæèì äîñòóïó: http://www.eu.sumy.ua/nc/center/articles/ (íàçâà ç åêðàíó).
14
V. Fritz, State-building. A Comparative Study of Ukraine, Lithuania, Belarus, and Russia, Central European University Press, Budapest–NY 2007, p. 148.
15 Ã. ². Ìåðí³êîâ, ªâðîïåéñüêà ³íòåãðàö³ÿ Óêðà¿íè òà åêîíîì³÷íà áåçïåêà
äåðæàâè, [Åëåêòðîííèé ðåñóðñ], Öåíòð ºâðîïåéñüêèõ ³í³ö³àòèâ, ðåæèì äîñòóïó: http://www.eu.sumy.ua/nc/center/articles (íàçâà ç åêðàíó).
quarter of 2010 domestic exports and imports between countries fell by 2%, compared to the first quarter of this year16.
The President of the European Commission José Manuel Barroso, in-troducing a new strategy “Europe – 2020” in 2010, stated that to continue building Europe, we must learn lessons from this crisis, which showed how we are interdependent. The aim of this strategy is to find the way out of crisis and development of the EU in the next decade, as global financial crisis undermined many achievements of the EU in past decades. To illus-trate, the total EU GDP in 2009 decreased by 4% (the worst figure since 1930); industrial production in the EU fell by 20% (the level of the 1990s); unemployment in 2010 also increased to a level of the 1990s. Overall, the EU potential decreased by a half as the result of the crisis. It should be em-phasized that the economies of the EU Member States are interdependent. For example, 200 Euros from 1000 Euros of economic growth in one Member State goes to another through internal trade within the EU. As a result, the EU requires coordination, especially during crisis17. On trade between the EU and Ukraine during the world financial crisis EU Com-missioner for Trade C. de H’yuht noted that in these times to Ukraine and Europe trade is not the problem but part of solving problems because it can create jobs and stimulate growth18.
During the first visit of President of Ukraine to Brussels Viktor Yanu-kovych stressed that Ukraine’s European integration is a key priority of foreign policy and strategy of social reform. The European side stressed that the long-term proposal to Ukraine is the new Association Agreement, which will lead to a deep and comprehensive free trade, giving Ukraine access to the market with 500 million consumers and allowing for a short period to double the Ukrainian exports to the EU19.
16 ². Â. Êëèìåíêî, ². Â. Óñ, Òåíäåíö³¿ ï³ñëÿêðèçîâîãî â³äíîâëåííÿ ñâ³òîâî¿ òîðã³âë³: ðèçèêè òà ïð³îðèòåòè çîâí³øíüîåêîíîì³÷íî¿ ïîë³òèêè Óêðà¿íè: Àíà-ë³òè÷íà äîïîâ³äü [Åëåêòðîííèé ðåñóðñ], Íàö³îíàëüíèé ³íñòèòóò ñòðàòåã³÷íèõ äîñë³äæåíü ïðè Ïðåçèäåíòîâ³ Óêðà¿íè, c. 1–2, 10–11, ðåæèì äîñòóïó: http://www.niss.gov.ua/public/File/2011_nauk_an_rozrobku/svitivi_econom_tenden-sii_2010.pdf (íàçâà ç åêðàíó). 17 ªâðîïà – 2020 : ªÑ ðîçðîáëÿº íîâó åêîíîì³÷íó ñòðàòåã³þ, “ªâðîáþëåòåíü” 2010, ¹ 3, áåðåçåíü, ñ. 4–6. 18 Òîðã³âëÿ ì³æ ªÑ òà Óêðà¿íîþ : â î÷³êóâàíí³ ðåâîëþö³¿, “ªâðîáþëåòåíü” 2011, ¹ 1, ñ. 4. 19 Ïåðøèé ïðåçèäåíòñüêèé â³çèò ³êòîð ßíóêîâè÷ çä³éñíèâ äî Áðþññåëÿ, “ªâðîáþëåòåíü” 2010, ¹ 3, áåðåçåíü, ñ. 7.
Ukraine and the EU have started informal consultations on a new basic agreement in May 2006. Official negotiations were initiated during the EU delegation visit to Kyiv in February 6, 200720during German presidency in the EU. In addition to the announcement of the beginning of negotia-tions during the meeting the parties have identified the specific date of the first round of consultations and a tentative schedule for the next round. It was scheduled to hold a meeting of official delegations of Ukraine and the EU every one – two months in Kyiv and Brussels in turn. In addition, it was decided to form several working groups and subgroups for particular activities to work on own consulting regime. During this meeting the par-ties also agreed on the need to focus on the first phases of the negotiation process on the content of the agreement, and its name to define the final stage of negotiations depending on the content.
To conduct negotiations four joint working groups were established to content of the agreement in the following areas: 1) political dialogue, for-eign and security policy, 2) justice, freedom and security, 3) economic and sectoral cooperation, the issue of human development, 4) free trade area (earned later compared with the first three – after finalization of formal procedures of Ukraine’s membership in the World Trade Organization).
EU Commissioner for External Relations and European Neighborhood Policy, Ms. Ferrero-Waldner said in March 2008 on a new enhanced agreement between Ukraine and the EU: “the most important for Ukraine and the European Union is currently negotiating with a new enhanced agreement. Ukraine finally became a WTO member. This opens the way for creation of a Free Trade Area that will be part of the agreement. Espe-cially important to the current negotiations is the political stability in Ukraine that should be based on democracy and the rule of law. In this sense judicial reform, fighting corruption and improving the business cli-mate are especially relevant for Ukriane”21. Regarding the timing of sign-ing the Agreement, the EU Commissioner for External Relations and European Neighbourhood Policy, Ms. Ferrero-Waldner in 2008 noted that the negotiation process is very capacious, especially concerning the Free Trade Area. Although both sides fairly quickly worked on developing an
20
Âèñíîâêè Ðàäè ªÑ ùîäî ïåðåãîâîð³â ñòîñîâíî íîâî¿ ïîñèëåíî¿ óãîäè ì³æ ªÑ òà Óêðà¿íîþ, â: Óêðà¿íà – ªÑ: â³ä Ïëàíó ä³é äî ïîñèëåíî¿ óãîäè, Ê. 2007, ñ. 12.
21 Äóæå âàæëèâîþ äëÿ íàøèõ ïåðåãîâîð³â º ïîë³òè÷íà ñòàá³ëüí³ñòü â
Association Agreement, but because a Free Trade Area agreement is part of it, the exact dates were difficult to predict at that time.
According to the joint statement of the EU-Ukraine Summit Septem-ber 9, 2008, the future Association Agreement will be based on principles of political association and economic integration. In July 22, 2008 the EU Council on General Affairs and External Relations showed its willingness to name a new agreement with Ukraine an “Association Agreement”, while reaching a common position on the need for recognition of Ukraine as an “European country” in the preamble to the Agreement. The basis of political association is the convergence of the positions of Ukraine and the EU in all matters of international peace and security, ensuring the direct participation of Ukraine in the EU policy, EU agencies and programs, community action to ensure national security interests of the Ukrainian state. At the heart of economic integration lies a deep and comprehensive Free Trade Area EU-Ukraine, which will gradually open access of Ukra-ine to the EU internal market.
In a joint statement on the Association Agreement between EU and Ukraine President of Ukraine Viktor Yushchenko, President of France Nicolas Sarkozy and European Commission President Jose Manuel Barroso noted that “the new agreement between EU and Ukraine will be an Association Agreement, which leaves the way opened for further pro-gressive development of relations between Ukraine and the EU. The EU acknowledges Ukraine’s European aspirations and welcomes Ukraine’s European choice. The gradual rapprochement between Ukraine and the EU in political, economic and legal areas will contribute to further prog-ress in relations between Ukraine and the EU”22.
Also it was noted that the Association Agreement would renew the common institutional framework of Ukraine and the EU, promote the deepening of relations between the two sides in all areas, strengthen politi-cal and economic integration between Ukraine and the European Union through mutual rights and obligations. This will create a solid basis for further convergence between Ukraine and EU foreign policy and security and promote the principles of independence, sovereignty, territorial integ-rity and inviolability of borders. European Union and Ukraine have to re-spond to the challenges of these principles at all appropriate levels of
22 ªâðîïåéñüêèé Ñîþç âèçíຠºâðîïåéñüê³ ïðàãíåííÿ Óêðà¿íè,
political dialogue, including ministerial level. The Association Agree-ment will also enhance cooperation in many aspects of justice, freedom and security, including migration. Creating a deep and comprehensive Free Trade Area with the large-scale regulatory approximation of Ukraine to the EU standards will promote the gradual integration of Ukraine into the EU internal market23.
For the period of negotiations between Ukraine and the EU on the Free Trade Area it can be said that the European Union is Ukraine’s largest trade partner. To illustrate, in 2009 the EU accounted for 29.3% of all Ukrainian trade, but, for example, with the Russian Federation this figure was 25.4%. Ukrainian exports to the EU are mainly “primary goods”: ag-ricultural products, steel, chemicals and energy. The EU sells in Ukraine primarily transportation equipment, products, machinery, clothing and textiles. It should be emphasized that Ukraine as a trading partner is not too important for the EU as trade with Ukraine is only 0,9% of the EU’s to-tal volume of trade. Moreover, a large decline in trade between Ukraine and the EU was in crisis year of 2009 (see Figure 1). Imports from Ukraine to the EU dropped by 45.8% over the previous year, while the EU exports to Ukraine – by 44.6%24. And, although since 2010 there is renovation of trade between the EU and Ukraine, but even pre-crisis years and the
per-30 25 20 15 10 5 0 import export balance 2007 12.4 22.4 10 14.5 25.1 10.6 7.9 13.9 6 2008 2009
Figure 1. Ukraine’s trade with the European Union (EUR billion)
According to the data:“ªâðîáþëåòåíü” 2011, ¹ 1, ñ. 5.
23
Ibidem 22, ñ. 6.
24 Òîðã³âëÿ ì³æ ªÑ òà Óêðà¿íîþ : â î÷³êóâàíí³ ðåâîëþö³¿, “ªâðîáþëåòåíü”
formance period beginning negotiations on a Free Trade Area between Ukraine and the EU can not be regarded as potentially the most high for both sides.
Free Trade Area between Ukraine and the EU will create an enabling environment for increased trade between the two sides. This is possible because a FTA provides for elimination of tariffs on almost all goods and services. Instead, Ukraine currently enjoys the advantage of EU General System of Preferences, under which about half of exported Ukrainian goods to the EU have tariff-free access to the market. However, tariffs are especially important for those of Ukrainian products, which constitute the largest share of country’s exports: steel, textiles, fertilizers. After the Agreement on Free Trade Area between Ukraine and the EU comes into force tariffs for more than 90% industrial and 80% of agricultural and food products will be zero. For the part of Ukrainian exports, which will not be fully liberalized, the EU offers substantial ease of access to its market, for example, zero quota for a certain amount of pork, meat, poultry, grains. Finally, the overall goal of a Free Trade Area between Ukraine and the EU is providing 95% of trade without customs duties between EU and Ukraine25.
Free Trade Area creation will require from Ukrainian government and business circles to find the balance of interests to achieve this initial level of integration. Most claims that Ukraine has to perform for a creation of a Free Trade Area coincide with the program of important reforms, which should give a strong impetus to overall development of the country. Ratio-nality choice of form agreement on a deep free trade for Ukraine is con-firmed by the analysis of possible scenarios of trade liberalization between the EU and Ukraine.
Creation of a Free Trade Area, except the abolition of duties, involves reaching convergence in the regulatory and trade fields (in the field of technical standards, sanitary and sanitary regulations, regulation of the internal market of ecological safety, competition policy, corporate governance and competitiveness, innovation and industrial policy, human intellectual property, government procurement, financial services, etc.)26.
25
Ibidem 24, ñ. 4.
26 Âèñíîâêè Ðàäè ªÑ ùîäî ïåðåãîâîð³â ñòîñîâíî íîâî¿ ïîñèëåíî¿ óãîäè ì³æ
ªÑ òà Óêðà¿íîþ, â: Óêðà¿íà – ªÑ : â³ä Ïëàíó ä³é äî ïîñèëåíî¿ óãîäè, Ê. 2007, ñ. 126.
It is clear that a free trade makes challenges particularly for the Ukrai-nian economy. Indeed, a transitional period during which the parties aim at gradual elimination of tariffs is provided for certain groups of products. In this matter the EU proposes the so-called asymmetric approach: Ukraine gets longer period than the EU for a gradual reduction or elimination of its tariffs.
Period for this is set from two to ten years, but the agreement provides approval for each agricultural or industrial product27. In addition, there is a significant challenge for Ukrainian producers, namely: compliance of Ukrainian production and quality standards with the EU’s. Addressing this question for Ukrainian producers is of particular relevance, because the elimination of tariffs in trade between Ukraine and the EU does not guar-antee free trade if the Ukrainian goods do not meet EU quality standards.
However, despite some problems and shortcomings in the integration of Ukraine into the European market at the present stage there is a need to intensify the economic integration of Ukraine into the EU, because the strategic interests of Ukraine in Europe include the need for technological upgrading of domestic production, the possibility of mastering the knowl-edge-intensive technologies. There is a need a change of inertial industrial development to innovative development of Ukrainian economy that meets the requirements of the present stage of scientific and technological revo-lution. On author’s view this will be facilitated by the development of large-scale economic relations with highly developed European countries. Ukraine is interested in large investments from these countries for the technological restructuring of its national economic complex. Also essen-tial aspect is the possibility of an appropriate financial support from the European countries, the development of financial cooperation with them.
From 1998 to 2008 Partnership and Cooperation Agreement between Ukraine and the EU was the basis for economic cooperation and relations between the two parties to the Agreement, and the gradual implementation of it let to a significant progress in relations between Ukraine and the EU in terms of economic integration.
However, when the term of the Partnership and Cooperation Agree-ment had finished, Ukraine and the EU launched negotiations on a Free Trade Area, which are still ongoing because of the need to clarify many
27 Òîðã³âëÿ ì³æ ªÑ òà Óêðà¿íîþ : â î÷³êóâàíí³ ðåâîëþö³¿, “ªâðîáþëåòåíü”
provisions for the mutual benefits of both parties. Creation of a Free Trade Area between Ukraine and the EU meets the provisions of the Law of Ukraine “On the Basis of Domestic and Foreign Policy” and the Law of Ukraine “On Principles of National Security of Ukraine”. For instance, Article 6 “The Priorities of National Interests”, as amended by the Law N 2411-VI from 01.07.2010 on the Law of Ukraine “On Principles of Na-tional Security of Ukraine” establishes a priority of “Ukraine’s integration into European political, economic, legal space, the development equal and mutually beneficial relations with other states in the interests of Ukraine”28. Moreover, after the expiration of the Partnership and Cooper-ation Agreement article 11 “Principles of Foreign Policy” of the Law of Ukraine “On the Basis of Domestic and Foreign Policy” from 01.07.2010 one of the main principles of Ukraine’s foreign policy defines “Ukraine’s integration into European political, economic, legal space to membership in the European Union”29.
It should be mentioned that benefits of a Free Trade Area between the EU and Ukraine are expectedly different for Ukraine. For example, the need to reform and move closer to European standards of quality goods and services will lead to modernization of the firms, which is positive in strategic significance for Ukrainian producers. Another advantage lies in the fact that a Free Trade Area will increase competition in the Ukrainian market, which will result in decreasing of prices for goods and services. The above mentioned together with the compliance of Ukrainian products to European quality standards will be an expected benefit for all Ukrainian consumers. In general, state policy of Ukraine towards European integra-tion helps to speed up the stabilizaintegra-tion process including in the economy of the country, as the EU standards are identical to those landmarks, which Ukraine faces in building economic relations on the model of leading Eu-ropean states.
Thus, a Free Trade Area creation between Ukraine and the EU, despite some short-term obstacles and disadvantages analyzed in this paper,
28 Ïðî îñíîâè íàö³îíàëüíî¿ áåçïåêè Óêðà¿íè, Çàêîí Óêðà¿íè â³ä 19.06.2003, ¹ 964-IV [Åëåêòðîííèé ðåñóðñ], Îô³ö³éíèé ñàéò Âåðõîâíî¿ Ðàäè Óêðà¿íè, ðåæèì äîñòóïó: http://zakon.rada.gov.ua/cgi-bin/laws/main.cgi?nreg=964-15, (íàçâà ç åêðàíó). 29 Ïðî çàñàäè âíóòð³øíüî¿ ³ çîâí³øíüî¿ ïîë³òèêè, Çàêîí Óêðà¿íè â³ä 01.07.2010, ¹ 2411-VI [Åëåêòðîííèé ðåñóðñ], Îô³ö³éíèé ñàéò Âåðõîâíî¿ Ðàäè Óêðà¿íè, ðåæèì äîñòóïó: http://zakon.rada.gov.ua/cgi-bin/laws/main.cgi?nreg=2411-17 (íàç-âà ç åêðàíó).
should lead to important benefits for Ukraine. This is, firstly, moderniza-tion of enterprises and better products and services on the Ukrainian mar-ket in accordance with European quality requirements. Secondly, it will strengthen trade between the EU and Ukraine. Thirdly and most impor-tantly, creation of a Free Trade Area with the European Union corre-sponds with the public policy of Ukraine towards European integration and is the next step for its implementation, because the history of EU inte-gration suggests that the economic inteinte-gration through the first elimina-tion of customs barriers is the foundaelimina-tion of European integraelimina-tion.
Although the start of negotiations between Ukraine and the EU on cre-ation a Free Trade Area coincided with the global financial crisis, both sides see in its creation, among other, the mechanism of the getting out of crisis and restoring economic potential. However, as the experience of the EU Member States shows, the openness of their markets and their interde-pendence has become an additional impetus for the spread and deepening financial crisis in the EU Member States, which should be kept in mind for Ukraine in its strategy for European integration, including through the es-tablishment of a Free Trade Area between the EU and Ukraine.
Tworzenie strefy wolnego handlu miêdzy UE i Ukrain¹: wyzwania i perspektywy
Summary
W artykule przeanalizowano ogólne kwestie dotycz¹ce handlu pomiêdzy Ukrain¹ i UE w okresie poprzedzaj¹cym globalny kryzys finansowo-gospodarczy i w jego trakcie, oraz wyzwania i oczekiwane korzyœci, jakie przyniesie Ukrainie strefa wolnego handlu miêdzy obiema stronami. Stworzenie strefy wolnego handlu z Uni¹ Europejsk¹ jest zgodne z polityk¹ Ukrainy zmierzaj¹c¹ do integracji europejskiej i realizacj¹ jej kolejnego etapu, poniewa¿ historia integracji UE pokazuje, ¿e jej podstaw¹ jest w pierwszej kolejnoœci integracja gospodarcza osi¹gana na drodze likwidacji barier celnych.
